Despite sports betting being legal in the majority of U.S. states (view map) regulated operators still wear handcuffs when it comes to offering certain types of odds. For instance, operators such as DraftKings (DK) cannot offer betting lines (at press) on the Academy Awards outside of Arizona, Massachusetts, Michigan, New Jersey, Indiana, Kansas, and Louisiana. Regulations have been even more stringent when it comes to U.S. political election betting, with DK and other operators only being permitted to offer actionable odds in the province of Ontario, Canada. These restrictions are in place, presumably, to protect the integrity of certain institutions. Some go so far as to say that limiting the types of odds available helps limit the growth of gambling addiction among mainstream America. However, any rationale of this kind has been made laughable due to a recent development in prediction markets.
For the uninitiated, a prediction market is an exchange-traded market where individuals can “invest” on the outcome of a variety of events with an unknown future. It sounds a lot like gambling, doesn’t it?
“Prediction markets are, for lack of a better term, just betting lines. Bettors can wager on who they think will win, by how much, and in which states.” (FORTUNE | November 5, 2024)
Up until last month, political elections were off limits to bettors within the United States. The Commodity Futures Trading Commission (CFTC) had tried to prohibit a company from offering betting odds on the U.S. presidential election until a federal judge struck down the CFTC decision at the end of the summer. He paved the way for the release of presidential election betting markets in time for November 5th showdown between Trump and Harris. In doing so, floodgates have been opened to add another layer of complexity to the growing problem gambling epidemic in the USA. Lawmakers, regulators, mental health support groups, and the public are urged to remain on high alert.
How Prediction Market Updates are Massively Problematic for the Problem Gambling Crisis in America
Now Everyone is Aware that They Can Gamble on Everything
For many Americans, being able to bet on the U.S. presidential election was an introduction into the concept of prediction markets. This presents a twofold concern.
For one, existing gamblers have quickly figured out that the restrictions they once faced regarding non-sport betting with regulated operators does not exist on prediction markets. Thanks to the federal judge’s overruling of the CFTC safeguard, habitual sports bettors now know they can also wager on life threatening natural disasters (yes, really) and who sits in POTUS’ seat, Senate, and House of Representatives.
Secondly, Americans who do not gamble regularly because they are not interested in casino games and sports, have now found something that they are interested in wagering on. In a nation where 2% of the general population has a gambling problem (with higher percentages among certain groups) this new interest will increase the volume of problem gamblers in a country that is already strained for mental/behavioral health resources. View more on the problem with election betting and other types of proposition bets.
$3.2 Billion Reasons Why
There were a total of five prediction market platforms offering betting lines on the 2024 U.S. presidential election. One of them was Polymarket, a platform which only takes bets in cryptocurrency (a regulatory concern in itself). FORTUNE reports that Polymarket took in a mind-blowing $3.2 billion on the outcome of the election. $3.2 billion wagered on just one platform! Compare this to the 2024 NCAA March Madness basketball tournament this year, which saw “just” $2.72 billion in wagers across all operators. If there was any doubt that interest in prediction market betting was too small to be of concern to the problem gambling crisis in America, there isn’t any longer.
Prediction Markets to Replace Polls?
Within days of prediction market betting odds being released for the U.S. presidential election, it was reported that the markets favored Trump by about 30 percentage points. This was contrary to political polls which showed that Harris and Trump were statistically tied (50/50) give or take a percentage point. Well, as the final results of the election showed, trump won by 295 to 226 electoral votes, which is by an approximate 24% margin. That is much closer to the prediction market total. After the polling farce of the Trump vs Clinton election in 2016, a final blow may have been dealt to political polls. This presents a concern if the clearly more accurate prediction market is to be any sort of replacement or even a supplement. It will only serve to validate prediction markets which will push them further into the mainstream and increase adoption across America’s population, which includes vulnerable (to problem gambling) segments.
Regulators Not Focused on Prediction Markets, Cleary
Regulations regarding gambling are clearly looser in prediction markets than they are for regulated sports betting and DFS operators. Not only is election betting and other forms of proposition odds (entertainment, weather events, etc.) allowed, it appears that people can gamble using cryptocurrency, such as the case with Polymarket’s $3.2 billion haul on Trump vs Harris.
With more lenient regulations comes less implied responsibility to protect the mental and behavioral health of prediction market membership bases. In the regulated sports betting market, operators such as FanDuel (view here), DraftKings (view here), and BetMGM (view here) have pledged to provide vulnerable players with access to mental health support services. As a result, important protections are in place for vulnerable players who use those platforms. The same cannot be said for the prediction betting market.
As we said, lawmakers, regulators, mental health support groups, and the public are called upon to remain on high alert as these markets are allowed to persist with impunity that is reminiscent of unregulated sportsbooks.
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